I opened an HSA account, then closed it 2 weeks later. However, a bank transfer of $3350 went through anyway. After my refund, do I still owe a 20% penalty?

[Ghoti2101]

When I realized the transfer went through, I requested my money to be refunded, and it took 3 months to get it back (actually $3320 came back since the index funds lost money). Then I received a form 1099-SA from the HSA bank. It's over the 60-day limit now, but I did deposit the same amount of money ($3350) in a new HSA through my employer.

[dmertz]

Were you eligible to make a $3,350 HSA contribution?
In other words, were you covered by a qualifying High Deductible Health Plan for any part of the year for which you made the original contribution?  Were you covered on December 1 of that year?
Was the contribution made to the HSA through your employer made for the same year as the earlier $3,350 contribution that was distributed to you 2 weeks after being contributed?
What is the code in box 3 of the Form 1099-SA?

[Ghoti2101]

Yes, I was eligible to make the contribution because I have an HDHP. There are no overlapping contributions with my employer HSA plan (I did not exceed the allowed contribution). The outside HSA account was started in December 2015 and I transferred the contribution in my employer-sponsored plan in 2016.

[dmertz]

Section 223(f)(3) of the tax code permits only an excess contribution to be returned. Since you were eligible to make the contribution, the distribution from the HSA 2 weeks after the contribution was made can therefore only be a normal distribution.  It's not entirely clear from your question whether or not this distribution was contributed to the employer's HSA in 2016 as a rollover contribution done within 60 days following the day the distribution was received from the earlier HSA, however it seems that you are saying that it was not.  If it was not, any portion of the distribution from the HSA not used for non-reimbursed qualified medical expenses incurred after the establishment of your HSA is subject to tax and, if you were under age 65 at the time of the distribution, a 20% early-distribution penalty.

[Ghoti2101]

The distribution happened 3 months after the HSA account was created. I closed the account 2 weeks after the HSA was created, but a technical glitch meant that somehow my money was deposited anyway (about one week after I closed the account). I requested the money back and didn't receive it until 3 months later.

[dmertz]

I'm pretty confused now.  I'm having difficulty understanding what contributions were made for what years to what accounts.  It's still not clear if you made any excess contributions.

If the only distribution occurred in 2016, how is it that you already have a Form 1099-SA for the distribution?
Is it an early-issued 2016 Form 1099-SA that will be reportable on your 2016 tax return?

Perhaps it would be useful to review this with a local tax professional to whom you can provide the details of what contributions were made, what distributions were made, the dates of those transactions, and how the transactions have (or will be) reported to the IRS by the HSA account custodians.  Without very specific details of the timeline and the reporting by the HSA account custodians, I don't think that an accurate answer is possible.

[Ghoti2101]

Clarification:
December 2015: opened and closed HSA account with outside bank. $3350 was deposited by mistake AFTER I was told the account was closed. I requested the money back.
April 2016: I finally receive a check for the money that was mistakenly deposited in December, less $150 or so due to market downturn, along with the 1099-SA for 2015.
July 2016: $3150 to Aetna HSA.

[dmertz]

OK, so the July 2016 contribution cannot be a rollover and is therefore is a totally unrelated HSA contribution for 2016.  It's extraneous information with regard to the tax treatment of the distribution for which you received the 2015 Form 1099-SA.

What is the code in box 3 of the 2015 Form 1099-SA?